INSIDE, OUTSIDE – REDIVIVUS

Once again, we find on the broken-linked Orders page at The Glasshouse at 400 Second Street, NW, an order that echoes C. L. Edson’s celebrated parody: “Made he mittens, Mudjekewis/ He, to keep the warm side inside/ Put the skin side inside/ He, to keep the cold side outside/ Put the stout side outside/ Then he turned them inside outside.”

“As to whether partner-level adjustment of outside basis incident to a deficiency determination should also be merely computational, Woods provides no direct answer. In dicta, however, the Court addresses the amici’s suggestion that its decision will permit the Internal Revenue Service to directly assess a penalty on a tax underpayment that cannot itself be assessed without deficiency procedures. See id. Noting that ‘an underpayment attributable to an affected item [such as outside basis] is exempt’ from deficiency procedures where partner-level determinations are unnecessary, the Court observes that ‘it is not readily apparent why additional partner-level determinations would be required before adjusting outside basis in a sham partnership.” Id.

“In the sham partnership at issue here, the Court of Appeals concluded that such additional determinations were required, and we proceed in accordance with that mandate.” Order, at p. 2.

So, co-ex’rs and IRS, “…set forth and discuss fully their/his position as to (1) whether additional partner-level determinations of outside basis are required in this case, (2) if so, what specifically are those additional partner-level determinations of outside basis, and (3) to what extent, if any, this Court has jurisdiction in this partner-level proceeding over petitioner’s income tax deficiencies….”Order, at p. 2.

An author, teacher, advocate and trusted advisor, Lew Taishoff is a New York City-based attorney with 51 years of experience in corporate and individual tax and real estate matters. He is an Enrolled Agent, examined and admitted to practice before the Internal Revenue Service, and admitted to practice before the United States ... Continue reading →